Determining Deadlines for Bringing a Claim under an Insurance Policy

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There are many policyholders that decide to accept a resolution to their insurance claim rather than obtain legal advice and/or representation from an experienced Miami insurance lawyer. Sometimes an insured will accept the policy justification given by an insurer for a denial or lowball settlement offer. When a policyholder walks away from a denial by their insurance carrier without seeking legal advice, the result can be forfeiture of a legitimate claim.

A case from the 7th Circuit Court of Appeals in Wisconsin provides an example of the reason not to rely on policy language or insurance law provisions used by an insurer to justify a denial of coverage. In Strauss v. Chubb Indemnity Insurance Company, an appellate court permitted an insured to proceed with an insurance claim despite the fact that the loss began over sixteen years prior to discovery of the loss. The insurer advanced strong arguments that the claim was not covered, but the plaintiff did not simply accept the insurer’s contentions.

The insured had a policy with the insurance company from 1994 to 2005, which included a provision indicating that the coverage under the policy only applied to “occurrences that take place while this policy is in effect.” Another provision in the policy with a heading “Legal Action Against Us” indicated that legal action against the insurer must be initiated within one year of the date a loss occurs. In 2010, the insured discovered water damage that had been continuous since the home’s original construction. When the insured filed a claim within a year of discovering the loss, the insurer denied the claim based on the following justifications:

The action was not brought within one year of loss.

Discovery of the water infiltration did not occur during the policy term.

The lawsuit was barred by the statute of limitations.

An insured may make a claim for a covered loss if a triggering event causes damage to the covered premises if the loss occurs during the policy period. There are four separate legal theories that courts apply to determine whether the damage occurred during the coverage term:

Contiguous Trigger Theory: The loss is ongoing from the time of exposure to manifestation.

Injury-in-Fact Theory: Permits the judge or jury to determine that the loss occurred at any point during which the effects of the peril cause actual loss.

Manifestation Theory: The loss does not occur until the point that the damage is manifested.

Exposure Theory: The loss occurs on the date which the peril that caused loss first occurred.

The insurer argued that the court should apply the manifestation theory when determining coverage, so the claim would only be covered if the policy were in effect at the time the water filtration was discovered. By contrast, the policyholder urged the court to apply the continuous trigger theory which would mean the claim was covered. The court decided to rely on the language of the policy which provided “all risk of physical loss to the house . . . covered under this part, unless stated otherwise or an exclusion applies.” The water infiltration was considered to constitute a single occurrence under the policy that caused repeated and continuing damage to the property.

The insurance company argued that the claim was not brought in a timely manner with regard to the policy or the statute of limitations. The court noted that the parties to an insurance policy in Wisconsin are free to negotiate a shorter limitation period than that specified by the statute of limitations to bring a legal action. The court noted the language of the policy permitted an action to be brought “within a year after a loss occurs” rather than a “year after inception” of the loss. Based on this distinction, the court determined that the claim was timely because it occurred prior to one year after the water penetration ceased.

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